“We’ve advocated hard duration; that basically means
something beyond five years,” Gross, manager of the world’s
biggest bond fund, said in a radio interview on “Bloomberg
Surveillance” with Tom Keene and Ken Prewitt. “The front end
of the curve, in the U.S. at least, is inert. You have to move
out into longer duration, harder duration.”

A government report today showing job growth was flat in
August bolstered the view that Fed Chairman Ben S. Bernanke will
be inclined to take additional steps beyond the two previous
rounds of debt buying, known as quantitative easing, or QE. The
central bank will likely extend the maturities of its portfolio
by buying five- to 10-year Treasuries while shedding shorter-maturity debt, Gross said, in what has been referred to as
“Operation Twist” after a similar program in the 1960s.

“I don’t know what form it will take and whether you call
it a QE, there’s certainly opposition from the hawks in terms of
the Fed,” Gross said. “We would stick in the 5- to 10-year
area and I think that will be the focus for the Fed in terms of
policy change come September.”

Stimulus Risk

More stimulus from the Fed may not be beneficial because it
risks a political backlash that could threaten to undermine the
central bank and weaken the economy by driving up commodity
prices, Mohamed A. El-Erian, Pimco’s chief executive officer and
co-chief investment officer with Gross, said today on Bloomberg
Television’s “In The Loop” with Betty Liu.

“The balance between the benefits and cost and risks has
changed in an adverse manner,” El-Erian said. “At the end of
the day we will not be solving anything. We’ll just be
undermining the economy and a critical institution for the well
being for America.”

Payrolls were unchanged last month, the weakest reading
since September 2010, after an 85,000 gain in July that was less
than initially estimated, Labor Department data showed today in
Washington. The median forecast in a Bloomberg News survey
called for a rise of 68,000. Hourly earnings and hours worked
both declined. The August data included a 48,000 drop in
information industry jobs, mostly reflecting striking Verizon
Communications Inc. workers.

Growth Slows

Governments should be focusing on creating growth rather
than reducing debt, Gross said. “To do it right now is almost
suicidal,” he said.

The economy expanded at a 1 percent pace in the second
quarter following a 0.4 percent gain in the first three months
of the year, the Commerce Department reported last month.
Consumer spending grew 0.4 percent, the smallest increase since
the last three months of 2009.

The $245 billion Total Return Fund managed by Gross has
lost 0.4 percent in the past month, underperforming almost 90
percent of its peers, according to Bloomberg data. The fund’s
4.07 percent return this year is worse than about two-thirds of
competitors, the data show. Gross has outperformed 98 percent of
his rival fund over the past five years.

Treasury Rally

Treasuries have returned 7.5 percent since February, when
Gross eliminated the Total Return Fund’s holding of U.S.
government securities. He boosted Treasuries to 10 percent of
assets in July from 8 percent in June, the Newport Beach,
California-based firm said on its website last month.

Gross said in a Financial Times interview that was
published this week that it was a “mistake to bet so heavily
against the price of U.S. government debt.”

U.S. government bonds have returned 2.8 percent in August,
the most since December 2008, as investors bet on slower growth
and sought a refuge from global financial market turmoil,
according to a Bank of America Merrill Lynch index.